Tax: A decline in income tax and social security contributions reflects reforms in a few countries

The decline between 2017 and 2018 was caused by large decreases in four countries: Estonia (2.54 percentage points), the United States (2.19 percentage points), Hungary (1.11 percentage points) and Belgium (1.09 percentage points), writes the OECD.

Even though the tax wedge on the average worker across the OECD declined between 2017 and 2018, small increases in the tax wedge were actually observed in 22 countries, or nearly two-thirds of the OECD. At the same time, small decreases in the tax wedge were observed in the remaining 10 OECD countries.

also considers the net personal average tax rate, which measures the income tax and social security contributions paid by employees, minus any family benefits received, as a share of gross wages. In 2018, the OECD average rate was 25.5%.

This OECD-wide average rate, calculated for a single person with no children earning the average wage, has remained stable in recent years, even though this rate varies considerably among countries: ranging from below 15% in Chile, Korea and Mexico to over 35% in Belgium, Denmark and Germany. also includes a Special Feature that looks at the taxation of the median worker in OECD countries, comparing this to the taxation of the average worker. In all OECD countries, the median worker has a lower wage than the average worker, due to higher differentials at the upper end of the income distribution.

On average, the median worker earns 80.8% of the average wage and consequently faces a lower average tax wedge, at 34.3% compared to 36.1% for the average worker. This difference is primarily due to lower income taxes.

However, the report shows that while providing a more comparable point in the wage distribution across countries, the median wage is difficult to calculate due to data availability, and the differences are not significant for most countries.The highest tax wedge for one-earner families with two children at the average wage in 2018 was in France (39.4%). Austria, Belgium, Finland, Greece, Italy, Sweden and Turkey also had tax wedges over 37%.

For this family type, New Zealand had the lowest tax wedge (1.9%), followed by Chile (7.0%) and Switzerland (9.8%).The OECD average tax wedge for the one-earner couple has remained flat for the last two years, at 26.6%. The largest increases in the tax wedge for this family type in 2018 were in Poland (10.3 percentage points).

There were no other increases over one percentage point. The largest decreases were in New Zealand (4.5 p.p.), Lithuania (2.5 p.p.) and Estonia and the United States (2.4 p.p.).In 2018, the highest average NPATR for single workers with no children earning the average wage were in Belgium (39.8%), Germany (39.7%) and Denmark (35.7%).

The lowest were in Chile (7%), Mexico (10.2%) and Korea (14.9%). The OECD average fell by 0.16 percentage points to 25.5%..